7 Things to Consider when Moving to Pension Phase in Superannuation

pension phase superannuation

Superannuation is an essential part of retirement planning for most Australians. It is a tax-efficient way to save for your retirement, and this article will give you seven key things to consider when transitioning from the accumulation phase to the pension phase within superannuation. 


The first thing to consider when transitioning to the pension phase in superannuation is whether you are eligible to make this move. You must meet one of the two main conditions of release: 

  1. You have met your preservation age of at least 60 and satisfied the retirement definition. Understanding this definition is a great way to access your super and the tax benefits while not actually retiring. Please book a call with me if you want to know more about how to take advantage of this. Or,
  2. You have attained age 65. When you pass this milestone, everyone can access their super and open an account-based pension account (pension phase account).

Once you make this transition, you have full, unrestricted access to your super. You can access this as a lump sum, income stream, or both.


The second thing to consider when transitioning to pension phase in superannuation is taxation. An account-based pension’s main benefit is it’s a completely tax-free environment. There is no tax on any capital gains, no tax on any earnings or withdrawals. However, this only applies to the $1.7 million that you are allowed to transfer into pension phase (this is called the transfer balance cap). If your total super balance is more than this, you will have to leave funds in the accumulation phase, where it is currently taxed at a maximum of 15%. However, this is still a low-tax environment, and these funds can remain here indefinitely until you pass away. You also have unrestricted access to these funds and can withdraw at any stage. It is essential to seek professional advice on how best to structure your affairs.

Investment Strategy

The third thing to consider when transitioning to the pension phase in superannuation is your investment strategy. When transitioning to pension phase, it is an excellent time to review your investment strategy. This move often coincides with retirement, and you should review your portfolio to ensure it generates sufficient income to support your retirement lifestyle. People are living a lot longer so don’t get caught in the trap of being too conservative in your investments and not having enough exposure to growth assets to make your money last. As always, you should consider your investment goals, risk tolerance, time horizons and the impact of inflation on your investments.

Transition to Retirement Strategy

If you are aged between 60 and 65, have you considered a transition to retirement strategy rather than fully retiring? This can allow you to access between 4-10% of your retirement savings annually while still working. It is intended to supplement your income while working less in the lead up to full retirement, but you can utilise it to take advantage of some contribution strategies to save tax and boost your super. Please seek expert advice, and you can speak with me here to discuss this in more detail.

Pension Payment Amounts

Another thing to consider when transitioning to pension phase in superannuation is your pension payment amounts. There are minimum drawdowns in pension phase, which you must adhere to. You can see these here. The minimum amount you can withdraw each year will depend on your super account balance and is calculated on the 1st of July annually. Once you’ve met your minimum drawdown requirements you have full flexibility to decide how much income you want to receive from your pension and how often you want to receive payments. You should consider your income requirements, pension entitlements, likely investment returns, sequencing risk, and other factors such as your life expectancy, when considering how much to withdraw.

Centrelink and Social Security

Next on the list when transitioning to pension phase in superannuation is Centrelink and social security benefits. If you are eligible for government benefits such as the Age Pension, your superannuation balance will affect your eligibility and the amount you receive. There are many legal ways to increase your pension entitlements, so you should speak with a qualified financial adviser to discuss ways to maximise these. It is best to get good quality advice and plan these things well in advance, as you can greatly enhance your entitlements with proper foresight.

Estate Planning

An often overlooked but essential thing to consider when transitioning to the pension phase is estate planning. If there are funds left over at the end of your life, have you considered who they will go to? When you start a pension, you will need to make new death benefit nominations. It is important to review and update your beneficiary nominations every 3 years if they are not non-lapsing binding nominations or as your circumstances change. 

Also, have you considered a re-contribution strategy? This strategy allows you to wash out the tax on any death benefits paid to non-tax dependants (eg. adult children). This can reduce the tax paid to these beneficiaries from 15% plus the 2% medicare levy to 0%. This strategy is now available to many more people since the work test has been abolished for after-tax contributions for people aged 67 to 74. You can read about this here and see a worked example. An expert estate planner can be worth their weight in gold and give you peace of mind your affairs are in order when the inevitable happens.


In conclusion, transitioning from the accumulation phase to the pension phase within superannuation requires careful consideration of many factors. This list is not exhaustive and these are just some high-level things to consider when making this move. Seeking professional advice from a qualified financial adviser or accountant can help you make informed decisions that are best suited to your individual circumstances. Planning this move many years in advance while working with a professional will reap the best results. You can speak to me if you want to discuss any of these strategies in more detail.


Samuel Kerr is the Senior Financial Adviser at Nucleus Wealth.

The information on this blog contains general information and does not take into account your personal objectives, financial situation or needs. Past performance is not an indication of future performance. Samuel Kerr is an Authorised Representative of Nucleus Advice Pty Limited, Australian Financial Services Licensee 515796. And Nucleus Wealth is a Corporate Authorised Representative of Nucleus Advice Pty Ltd.

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